I received a CP28A. I rent out a portion of my home (17% by square footage is an ADU with a separate entrance, bath and kitchen) and the mortgage is more than the cap (>$750k, closer to $1.1M and I'm in CA). Since I rented out part of my home, TurboTax Desktop had me enter the Mortgage Interest in the rental section for Expenses. It told me to entire the entire amount and then allocated the personal part in Schedule A and the rental expense portion in Schedule E. It did not cap the personal part as the interest on the $750k on federal.
This appears to be an error in the TurboTax calculation.
What is the correct way to fix this when I amend? If I adjust the mortgage interest paid down to for TurboTax to update/correct Schedule A, that will make Schedule E incorrect because it will be 17% of the lesser amount. It will also make Schedule CA incorrect, because CA allows for deducting interest up to $1M, which the qualified portion of the mortgage principal is less than that.
